Morningstar - Q3 2021 - 69

Strategies
Bold Moves
Most share classes of Oakmark International Small Cap
are now rated Gold.
Andrew Daniels
BEST IDEAS: MANAGER
This article is adapted from the fund's Morningstar Global Fund Report dated
June 28, 2021.
Increased conviction in Oakmark International Small Cap's OAKEX investment
approach lifts most share classes' Morningstar Analyst Ratings to Gold
from Bronze. The more expensive service share class was upgraded to Silver
from Bronze.
This strategy is comanaged by David Herro, Michael Manelli, and Justin Hance.
Herro is a legendary non-U.S. equity investor who has run Gold-rated
Oakmark International OANIX since 1992 and has been a comanager here since
1995. That said, Herro has devolved some responsibilities on this offering to
Manelli and Hance, who have been working with increasing autonomy since
becoming comanagers in 2011 and 2016, respectively. Herro's lower level
of involvement here introduces a level of uncertainty, but Manelli and Hance
have always been impressive in interviews, are in sync with the team's
philosophy, and invest heavily in the offering alongside fundholders. Backing
the trio is an experienced, albeit lean, group of six non-U.S. teammates.
Alongside a strong investment team is a disciplined, robust investment
process, rooted in old-fashioned, bottom-up detective work. The team seeks
smaller-cap stocks-with market capitalizations under $5 billion-trading
about 30% below business values but that also have sustainable growth
opportunities, stable finances, and executives who not only allocate capital like
long-term owners but also are big shareholders. The resulting 50- to 60-stock
portfolio is compact and conviction-weighted, with high active share.
While this strategy can be a bumpy ride for investors, the managers have
proved time and time again to be unwavering in their commitment to
this bold approach, with 2020-21's market environment being no exception.
The strategy was among the foreign small/mid-value Morningstar Category's
worst performers in early 2020. But management stuck to its knitting,
holding on or adding to several detractors, which helped the strategy become
a top performer in the ensuing rally through May 2021. While such a
performance profile underscores the need for investors here to tolerate risk,
this strategy is likely to reward those investors who are patient. K
Andrew Daniels is an associate director, U.S. equity strategies, at Morningstar Research
Services LLC.
Oakmark International Small Cap OAKEX
Stats 06/30/2021
Morningstar Analyst Rating
Œ
Fee Level
Above Avg
Process
High
Growth of 10K 06/30/2021
$15K
Oakmark International Small Cap
MSCI World Ex USA SMID Value
11.64
13.21
12
9
6
07/2018
07/2019
Morningstar Style Box 06/30/2021
Value Blend Growth
Snapshot as
of most recent
portfolio.
07/2020
Morningstar Ratings 06/30/2021
Period
Mstar
Return
3-Yr
5-Yr
High
High
Mstar
Risk
High
High
10-Yr Above Avg High
Overall Rating
Top 5 Countries 06/30/2021
Country
United Kingdom
Switzerland
Australia
Germany
Italy
Morningstar Category
Foreign Small/Mid Value
10-Yr Annlzd Return
7.11%
Morningstar Pillars 06/30/2021
People
Above Avg
Parent
Average
Expense Ratio
1.37%
10-Yr % Rank in Cat
25
Mstar
Rating
QQ
QQ
QQ
QQ
■ Fund % ❙ Category Average %
14.5
6.2
5.8
5.9
2.4
0%
6.4
5
10
morningstar.com/lp/magazine
15
25
69
9.8
7.5
6.7
23.5
3-Yr Avg
21.9
10.3
7.1
4.0
6.2
Small Mid Large
https://www.morningstar.com/authors/1974/andrew-daniels https://www.morningstar.com/authors/1974/andrew-daniels http://www.morningstar.com/lp/magazine

Morningstar - Q3 2021

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Morningstar - Q3 2021 - Cover1
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Morningstar - Q3 2021 - 1
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